The school’s board of directors has decided to seek an alternative to the expensive state-run pension plan, the Teachers Retirement System of Louisiana (TRSL).
Sean Bruno, a certified public accountant, and Tony Monk, of the Morgan Stanley investment firm, addressed the board at its April 10 monthly meeting to explain the difference between defined-benefit retirement plans like TRSL, and the private 403(b) plans some other charters have switched to.
Under TRSL, they explained, the state assumes the risk of investing combined contributions from teachers and schools, and promises retired teachers a pension based on a percentage of what they have contributed.
Under 403(b) plans, Monk said, the payoff may be higher, but the teacher assumes the risk if the investment loses money. Board Attorney Tracie Washington said that, while there was risk with the 403(b) funds, the TRSL system was a form of “unfunded mandate” and that at any time the state can raise the amounts teachers and schools must contribute.
Second-grade teacher Deidre Isom spoke for others who are close to retirement and would be most affected by the change. If they withdraw their contributions from TRSL ahead of retirement, they lose money because the state gets to keep the portion contributed by the school to an employee’s retirement.
Instead teachers can elect to leave their funds with TRSL to tap after they reach retirement age, but if the school has withdrawn from the plan, it will not be making additional contributions to the teacher’s nest egg.
“I never thought we would come to this, at this table, for King,” principal Doris Hicks said. But without having to make the increasingly costly contribution to the state fund the school might finally be able to afford overdue raises for teachers, she noted.
It’s not difficult for a school to leave the TRSL program — “it’s a simple process,” Monk said. Changes in teacher retirement plans are considered minor changes by the state Board of Elementary and Secondary Education and do not require amending the school charter, he advised.
Board secretary Cora Charles asked Monk which plan was better for the teachers. Monk said that the TRSL plan was better, because the state must deliver the defined benefit – the pension – even if it fails to invest wisely and loses money. However, funds like TRSL are also susceptible to political factors and forced renegotiations in the face of sweeping changes in Louisiana education funding, such as the ones that have recently driven contributions higher than many schools feel they can afford.
Charles was the sole no vote as the board approved a motion to find a 403(b) plan for the school. Charles said she was going through retirement herself, and felt that the TRSL plan was better for teachers.
Hicks said there were about six teachers at the school who are close to retirement, including Isom, and that these are faculty members she would “hate to lose.”
In addition to Hicks, Charles, and Washington, board members present for the meeting included Eartha Johnson, Thelma Ruth, and treasurer George Rabb. Members Kenya Rounds, Gail Armant, and Sandra Monroe were absent.
The meeting began at 12:12 p.m. and ended at 1:47 p.m.